Maximise take home pay

**malvolio** · 10 May 2008, 07:10

Go away. Read the guides. Read the advice in the stickies in the Legal/Accounting board. Don't read the Beano or listen your ill-advised mates.

Come back when you can frame a sensible question.

**monkeyBoy32** · 10 May 2008, 07:40

Originally posted by malvolio View Post

Come back when you can frame a sensible question.

He opened his question with "I'm a contracting newbie" i.e. he's only just started and needs to ask loads of questions to learn how it all works. I really don't understand why, on every internet forum I've been on, there's always someone who enjoys nothing more than giving himself a stiffy by making newbies feel stupid.

It annoys the hell out of me because these forums can be such a great resource for everyone and answers like this just put people off - they never help.

There's nothing wrong with pointing him in the right direction but being nasty about it - "Don't read the Beano or listen your ill-advised mates" is just bullying for the sake of bullying.

patricktroughton - ask whatever you want to - asking questions is the best way to learn.

**THEPUMA** · 10 May 2008, 07:42

Ignore him. It was a perfectly sensible question. The only answers you'll get out of him will be rude and/or wrong.

Your proposal is flawed. You can't simply close down your company every 2 years (incidentally from a tax perspective 2 years would be arbitrary. it would only need to be 1 year) without genuine commercial justification.

Also, if you want to maximise your income (and minimise your tax), you should reduce your salary further to £5,400 and increase your dividend to about £2,700 pcm.

If you want to take more than this, other than playing around the edges with directors' loans etc, you are just going to have to take the extra tax hit.

**original PM** · 10 May 2008, 08:05

careful

if you cannot prove you are acting a s ltd company (e.g. you have 1 job and 1 place of work and are solely using your ltd company as a means of avoiding tax) then paying yourself a salary too low (e.g. not in line with market value) may bring HMRC knocking

although if your turnover is not that much you should be okay.

**malvolio** · 10 May 2008, 08:27

Originally posted by ThePuma

Ignore him. It was a perfectly sensible question. The only answers you'll get out of him will be rude and/or wrong.

Rude? OK, I'm intolerant of people asking questions out of ignorance. I've said many times that contracting is a serious career choice and you ned to do the research before you start. More than a few of the regulars agree with me on that.

Wrong? Not that often, actually. And I'm happy to admit it when I am.

My point - albeit roughly expressed - is that here we have someone who has a partialy informed understanding of how contracing and tax works asking about how to use company closure as a tax avoidance scheme (something that is very clearly explained on one of the websites he would be reading had he taken my advice to read the guides, incidetnally, including a short discourse on why it's a bad idea).

On the other hand we have a community of contractors who spend half their working life trying not to be painted as tax-evading unethical cheats by HMRC and who are facing constant and increasingly desparate attacks on their chosen way of working - a way, incidetnally, that is key to UK PLC's economic well-being.

So sorry if I get shirty with stupid people who can't do the research and who perpetuate a damaging myth, but I'm more leopard than puma...

**THEPUMA** · 10 May 2008, 08:30

Originally posted by malvolio View Post

On the other hand we have a community of contractors who spend half their working life trying not to be painted as tax-evading unethical cheats by HMRC and who are facing constant and increasingly desparate attacks on their chosen way of working - a way, incidetnally, that is key to UK PLC's economic well-being.

Can we assume therefore that you have amended your incorrect P11Ds and tax returns following our recent exchange where you admitted you had submitted them incorrectly?

**QwertyBerty** · 10 May 2008, 08:45

Originally posted by malvolio View Post

I'm intolerant of people asking questions out of ignorance

Why else would someone ask a question?

QB.

**malvolio** · 10 May 2008, 08:48

Only if we assume my own accountant has been incorrectly completing them on my behalf? I went back to check the detail and find he has always treated it as a BIK. Which is a good illustration of why even fairly well-informed people need professional backup to get the little things right.

**NotAllThere** · 10 May 2008, 12:17

Originally posted by patricktroughton View Post

Hi,

I'm a contracting newbie. I have a limited company with me as sole director and sole employee. I've been told the best way to run my limited company is to have a low salary (£10k), then take the rest as dividends. But taking dividends over £26k in a tax year incurs 25% tax, which is BAD! So anything over £26k should be left in the company. The company is then closed every 2 years and you apply for entrepreneur's relief through capital gains. This only incurs 0-6% (depending on circumstances).

Is this the best way to run a company? Are there any other ways to maximise take home pay? Also, doing things this way means I can only take £10k + £26k a year. How can I take more out of the company if I need it?

Thanks

The best way - "the most tax efficient way" - not necessarily how you should run it for your requirements.. The bit emboldened is really dumb. If you want more money, take it out of the company AND PAY THE EXTRA TAX.

There. That wasn't difficult, was it?

Maximise take home pay